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#2131600 - 05/23/17 10:31 PM TBD Loans
HMS Pippii Offline
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Internal Audit wrote up our residential business unit on how they were handling their TBD applications and cited 1026.37(a)(6), specifically this piece:

37(a)(6) Property.
1. Alternate property address. Section 1026.37(a)(6) requires disclosure of the address including the zip code of the property that secures or will secure the transaction. A creditor complies with § 1026.37(a)(6) by disclosing a complete address for purposes of the U.S. Postal Service. If the address is unavailable, a creditor complies with § 1026.37(a)(6) by disclosing the location of such property including a zip code, which is required in all instances. Location of the property under § 1026.37(a)(6) includes location information, such as a lot number. The disclosure of multiple zip codes is permitted if the consumer is investigating home purchase opportunities in multiple zip codes.

Residential says they have to collect the zip code to run DU and get pricing which they think is required to have when talking to a potential borrower who wants to buy a house. As a result, they've been using TBD as the street address and entering zip codes in order to send out the LE based on Internal Audit. We've been trying to find a way around this so that we can use TBD as it's traditionally been used (and make residential feel like they're not at a competitive disadvantage with every other lender). But Reg Z appears to be dead on point in the cite reference above - today an investor refused to buy a loan because of this. We requested their cite reference and they sent us the CFPB Small Entity Guide to TRID and pointed us to page 31 which refers to 1026.2 and 1026.19, but not 1026.37.

An obvious solution would be not to collect income or mortgage loan amount sought, but that could be interpreted as an end-run around Reg Z. What, if anything, are we missing that says we can wait for a complete property address before issuing the LE?

Alternatively, how are other banks handling TBD customers?
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#2131614 - 05/24/17 11:58 AM Re: TBD Loans [Re: HMS Pippii]
#12 Offline
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1026.19(e)(1)(iii): The creditor shall deliver or place in the mail the disclosures required under paragraph (e)(1)(i) of this section not later than the third business day after the creditor receives the consumer's application, as defined in § 1026.2(a)(3).

1026.2(a)(3): (i) Application means the submission of a consumer's financial information for the purposes of obtaining an extension of credit.
(ii) For transactions subject to § 1026.19(e), (f), or (g) of this part, an application consists of the submission of the consumer's name, the consumer's income, the consumer's social security number to obtain a credit report, the property address, an estimate of the value of the property, and the mortgage loan amount sought.

To me, that sentence you highlighted is intended if you have multiple complete addresses, but I could be wrong. smile
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#2131622 - 05/24/17 12:57 PM Re: TBD Loans [Re: HMS Pippii]
Tracey, CRCM Offline
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I am confused. If there is no property address, then its not an application, therefore no LE is required to be sent.
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#2131631 - 05/24/17 01:30 PM Re: TBD Loans [Re: HMS Pippii]
Dan Persfull Online
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I'm looking to purchase lot 22 located in the Timbucktoo Addition to build a new home. Maybe lot 45 in the Wacked Out Addition. An USPS/911 address has not been assigned to the lots. IMHO that is what the above citation is addressing.
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#2131636 - 05/24/17 01:49 PM Re: TBD Loans [Re: HMS Pippii]
RR Joker Offline
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Agree with Dan, I think! laugh (and love the examples). You may not know exactly what zip code a property is located in so you can submit multiples, if need be, in that general area. BUT, to have multiple 'maybe this one, maybe that one' to me, is not something that can be disclosed unless the pricing is identical and you just haven't decided exactly which lot you want.
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#2131640 - 05/24/17 01:51 PM Re: TBD Loans [Re: HMS Pippii]
rlcarey Online
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I agree - no property address - no application, unless the bank chooses to only require 5 of the six elements. Saying I'm thinking about buying in XYZ subdivision or maybe over by ABC school, is not providing a property address. If you have a pre-qualification program - that is what you have.
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#2131654 - 05/24/17 02:26 PM Re: TBD Loans [Re: HMS Pippii]
Compliance NABW Offline
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Yes. You have to have a specific property for the "address" element, though you don't have to have a USPS address per se. You can use Lot 7 of Wacked Out Lakes, Concord, CA 94520, 94519. Maybe you don't quite know the Zip Code for sure yet in areas with multiple zip codes. But, you have to have an actual property submitted.

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#2131676 - 05/24/17 03:15 PM Re: TBD Loans [Re: HMS Pippii]
Truffle Royale Offline

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Like all the others here, I agree, you don't have an application if you don't have all six elements which includes an address, not just a zip code/region where the property may or may not end up being. .

btw, you can run DU without anything beyond 'TBD' and the name of the state. That's how we do it here for our prequals.
Oh, and we don't give LEs on prequals either.

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#2131685 - 05/24/17 03:44 PM Re: TBD Loans [Re: HMS Pippii]
HMS Pippii Offline
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This is what I'm looking for - Internal Audit was told at a training session by a vendor I won't name that the zip code issue in 1026.37 applies to TBDs for customers that are shopping and it's spiraled from there.
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#2131689 - 05/24/17 03:51 PM Re: TBD Loans [Re: HMS Pippii]
Truffle Royale Offline

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INTERNAL audit ...TRAINING by THIRD PARTY vendor. :shudder:
As we all know too well, vendors have been know to pull things out of their, ah, hat, and run with it. smirk

If the address is unavailable, a creditor complies with § 1026.37(a)(6) by disclosing the location of such property including a zip code, which is required in all instances.

I think this is where your internal audit and the vendor are going off the rails by glossing over the word INCLUDING.
The sentence reads 'disclosing the location of such property including a zip code'.
There is no indication here that JUST a zip code will suffice for the address.

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#2131793 - 05/24/17 07:52 PM Re: TBD Loans [Re: HMS Pippii]
HMS Pippii Offline
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Except for the last sentence: The disclosure of multiple zip codes is permitted if the consumer is investigating home purchase opportunities in multiple zip codes....
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#2131802 - 05/24/17 08:20 PM Re: TBD Loans [Re: HMS Pippii]
rlcarey Online
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investigating home purchase opportunities in multiple zip codes....

That still would require them to give you multiple property addresses. You may also choose to give them multiple LEs if fees might vary based on specific property location.
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#2131807 - 05/24/17 08:37 PM Re: TBD Loans [Re: HMS Pippii]
Truffle Royale Offline

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I read that section to reference the address to be shown on the LE.
It's saying that you can use a lot number in lieu of a street number.
It goes on to say that IF the borrower is looking at multiple properties, you can show multiple zip codes.

imho, your auditors are trying to flip that saying that if the address is TBD and you know the general area the borrower is looking in you have to use the area's zip codes and issue an LE.
I don't buy it.
From the CFPB: If a consumer submits an application, a requirement to provide the Loan Estimate is triggered under § 1026.19(e). An application is defined as the submission of six pieces of information: (1) the consumer’s name, (2) the consumer’s income, (3) the consumer’s Social Security number to obtain a credit report (or other unique identifier if the consumer has no Social Security number), (4) the property address, (5) an estimate of the value of the property, and (6) the mortgage loan amount sought.

There's no way that a zip code can be construed as a property address.

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#2131832 - 05/24/17 09:56 PM Re: TBD Loans [Re: HMS Pippii]
HMS Pippii Offline
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I'm not trying to disagree with any of this. I totally agree that it makes NO sense to send out an LE on what's effectively a pre-qual.

Is there something in TRID or Reg Z that defines "property address" as a complete address because that would resolve this. 1026.37(a)(6) without the last sentence is a perfect definition. It even accounts for properties that only have the lot number if the street address hasn't been assigned yet. If we interpret "investigating home purchase opportunities in multiple zip codes" as looking at specific homes with actual addresses, I think that makes sense.
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#2131834 - 05/24/17 10:06 PM Re: TBD Loans [Re: HMS Pippii]
rlcarey Online
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Black and white in the preamble - they are talking about if a creditor issues LEs on pre-approvals:

"In addition, to the extent that a creditor does not want to provide a Loan Estimate for a preapproval before a property address is known, the creditor could instead deliver a written estimate of terms or costs specific to that consumer, provided that the written estimate contained the disclaimer required by § 1026.19(e)(2)(ii). Accordingly, the Bureau believes § 1026.37(a)(6) does not need to be revised to address preapprovals. However, to provide additional flexibility for creditors to use the Loan Estimate for preapprovals where the property address is unknown, the Bureau is revising comment 37(a)(6)-1 to state that while the disclosure of a zip code is required in all instances, the creditor may disclose multiple zip codes if the consumer is investigating home purchase opportunities in multiple zip codes."
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#2131836 - 05/24/17 10:30 PM Re: TBD Loans [Re: HMS Pippii]
HMS Pippii Offline
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Thank you, Randy!!!
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#2132101 - 05/26/17 03:11 PM Re: TBD Loans [Re: HMS Pippii]
gcompliance Offline
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At our company we offer Preapprovals all day long and we use TBD in the address and a potential zip code and never issue a LE. But I have a similar question: We would like to be able to offer a 90 day lock on one of our 7/1 ARM portfolio loans. My concern if we lock a rate I should be issuing a LE to disclose that. However, I thought you should never issue a LE on a preapproval since we do not have a specific property in mind. Can we issue a LE or not.

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#2132103 - 05/26/17 03:12 PM Re: TBD Loans [Re: HMS Pippii]
RR Joker Offline
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Why can't you execute a lock without producing an LE? If they then apply, the remainder of the 90 days would be your 'good through' date.
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#2132113 - 05/26/17 03:25 PM Re: TBD Loans [Re: HMS Pippii]
rlcarey Online
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As long as the rate lock didn't involve a lock fee.
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#2132118 - 05/26/17 03:50 PM Re: TBD Loans [Re: HMS Pippii]
gcompliance Offline
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There will be no rate lock fee. If that is the case are you saying I can or should not issue a LE? I am hoping a simply letter indicating the rate is locked with the pertinent details would be sufficient but I'm not sure if I am required to issue the LE or if I should stay away from issuing it.

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#2132120 - 05/26/17 03:53 PM Re: TBD Loans [Re: HMS Pippii]
rlcarey Online
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Rate lock requirements are governed under State laws. If you don't have the six elements - you don't have a TRID application.
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#2132132 - 05/26/17 04:08 PM Re: TBD Loans [Re: HMS Pippii]
RR Joker Offline
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A rate lock is an event that requires disclosure either at application or subsequently...However, there is nothing that says you can't execute an agreement with someone without having an application...IOW, it's a 'promise'. As Randy wisely points out, so long as there is no fee involved, it's up to you to determine when you have an actual application.

If you have an executed 'promise' to hold a rate for 90 days...and they apply 15 days later...your LE will show that the rate is locked for the remaining 45
Last edited by RR Joker; 05/26/17 04:10 PM. Reason: added more clarification
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